by Ram chandra Timilsina 4:47 PM 0 comments

 Is Micro-fulfillment the Next Big Bet for Malls, Retailers,

and Restaurants?

Case

Abstract

This case explores the potential for repurposing outdated shopping malls as micro-fulfillment

hubs for restaurants and retailers. The COVID-19 pandemic compounded commercial real

estate occupancy challenges while increasing demand for restaurant and retail delivery.

Supporting resources define micro-fulfillment, detail market trends, and provide meaningful

examples. Students are asked to explore the opportunities and challenges associated with

micro-fulfillment and the possible effects on other industries.

Learning Outcomes

Students should apply their learning about micro-fulfillment to discuss the implications for commercial real

estate, restaurants, and retail. Students will also consider the capital investment necessary for such significant

transformation.

The Issue

Employers and workers have quickly grown comfortable with remote working and shopping. A recent

McKinsey report concludes that demand is expected to rise across all shopping segments and consumer

groups, and Morgan Stanley estimates that U.S. home food deliveries could reach USD 350 billion by 2025.

But are companies ready to meet the increasing demand for small custom deliveries? Not yet.

Even before the pandemic, online retail and rapid food delivery struggled to service “the last mile” to the

doorstep. Delivery speed and custom orders strain company capabilities to manage inventories, maintain

technology, ensure data security, and meet health and safety standards. In turn, customer loyalty hangs in the

balance as companies race to affordably match logistics with demand.

Surging demand from “stay-at-home” consumers compounded the problem and stressed even the most

reliable couriers. On Cyber Monday 2020, UPS imposed shipping restrictions on Gap, Nike, and others

to cope with record deliveries and capacity shortages. Restaurants and grocers face similar challenges in

disrupting kitchens and straining margins to process, prepare, and deliver small orders.

Empty mall retail space provides an ideal solution for fractured supply chains. Malls are often located

near highways and suburban population centers. They have loading docks for bulk receiving, inventory

management infrastructure, and large parking lots fit for small delivery vehicles. Repurposing failing or

abandoned malls as mini-distribution hubs stabilizes both overextended supply chains and troubled

commercial properties. Mall owners in need of cash flow and lease agreements to meet loan obligations are

listening.

For instance, CloudKitchens, a restaurant start-up, repurposed empty mall locations into “ghost kitchens” to

serve delivery customers only. UberEats, DoorDash, and other services use parking lots redesigned as order

pickup queues. The model has wide appeal as fast food and casual dining restaurants rely more on delivery.

These isolated operations allow existing shops to focus on in-person, takeout, and drive-thru service without

the disruption of food couriers and online order spikes at peak dining times. A similar model may work for

retailers preparing orders of popular items for same-day or next-hour delivery.

While appealing, micro-fulfillment requires major technology and physical infrastructure investment. Speed,

accuracy, and product selection via technology replace the customer retail experience. Such digital

transformation requires carefully coordinating customer interfaces with order fulfillment and delivery.

Why Is It News?

Before the pandemic, many shopping malls were struggling to generate sufficient customer traffic and retain

tenants. As consumer demand for at-home delivery continues to rise, companies now compete for logistics

resources. Commercial real estate holders, restaurants, and retailers are thoroughly evaluating micro-

fulfillment solutions. Repurposing existing infrastructure, investing in emerging technologies, and restructuring

supply chains offer opportunities with many economic beneficiaries.

Discussion Questions

What are possible benefits of micro-fulfillment to malls, retailers, and restaurants?

What are some major challenges and risks facing legacy retailers and restaurants considering

micro-fulfillment?

What other industries or businesses that could benefit from malls, restaurants, and retailers are

pursuing micro-fulfillment investments?

https://dx.doi.org/10.4135/9781529774269